Caribou Gold Mining Corporation is expected to pay a dividend of $6 in the upcoming year.Dividends are expected to decline at the rate of 3% per year.The risk-free rate of return is 5% and the expected return on the market portfolio is 13%.The stock of Caribou Gold Mining Corporation has a beta of -0.50.Using the constant growth DDM,the intrinsic value of the stock is _________.

Question

Quizplus · Accepted Answer

The intrinsic value of the stock is $50.00. This is calculated using the constant growth DDM, which takes into account the expected dividend, the expected growth rate of dividends, the risk-free rate of return, and the expected return on the market portfolio. The beta of the stock is used to calculate the risk premium, which is then used to discount the expected dividends back to the present value.

Caribou Gold Mining Corporation Is Expected to Pay a Dividend